August 24, 2005

Google and the Startup

Here's another excerpt from the same NY Times article mentioned below:

"In the day, you'd hear that Microsoft was the evil empire, especially in Silicon Valley," said Brian Lent, the president of Medio Systems, a start-up in Seattle working on mobile-phone-based search. "Google is the new evil empire, because they're in such a powerful position in terms of control. They have potential monopolistic control over access to information."

Mr. Lent, who worked closely with Google's founders, Sergey Brin and Larry Page, when all three were Ph.D. students at Stanford University, helped introduce Mr. Brin and Mr. Page to one of the company's earliest investors.

"I like and respect the Google guys," Mr. Lent said, "but let's just say that their ultimate aim seems to me to be, 'One Google under Google, for which it stands.' "

The italics are mine.

Let's pretend that we are having a conversation about my startup plans. As I'm proudly describing my newest venture, you ask about my marketing strategy. "Oh", I reply, "I'll rely exclusively on the services of a stranger I met at the pub last week. He's a pretty busy guy but promised to do everything he can--when his schedule allows--to get the word out about my startup. So I'll just sit at my desk and wait for the orders to come in."

You'd rightfully think that I was insane. At least I hope you would.

So what am I getting at? Well, any startup that thinks it can achieve lift off with a strictly online marketing campaign these days is in for a world of pain.

Like the stranger in the pub, the Big G is not very helpful at all in this respect. Neither has any genuine motivation in seeing you succeed.

As mentioned in earlier posts, Google sandboxes new websites for a year. Although Goog denies it, this is the word at the various webmaster sites. It's also been my experience. By not displaying new sites on its SERPs (Search Engine Results Pages) for the first 12 months, Google forces startups to spend on Adwords advertising. The problem now is that the performance of Adwords for small advertisers has deteriorated badly. Two years ago, surfers clicked on ads because they were seeing them for the first time. Now hardly anyone clicks because they have seen the ads a thousand times. When they do click, they don't buy. For all intensive purposes, most Adwords expenditures are akin to setting your advertising dollars on fire. (Sorry, I collect malapropisms.)

The reason I bring this up is because many small startups think "just Google" for initial marketing. They tell me that they'll join Adwords and put some time into SEO efforts and the money volcano will explode over their heads. Well, the reality is that this thinking is as insane as relying on a disinterested stranger you met at the pub to generate your sales. Adwords can quickly burn up a lot of money while not providing much of a return. Likewise, Google's algorithms drive webmaster's batty. Forget about mastering SEO during the first year. (Someday I'll write about the Google Whiplash which results in wild ranking fluctuations on its SERPs.)

So, the lesson here is not to rely on strictly online efforts for creating sales. It won't happen--with rare exceptions.

These days you need to use a hybrid business model for startups. In other words, don't design your business as strictly online. Add an offline dimension to it, at least in terms of marketing. When things are slow--and they will be--don't think for a moment that raising your Adwords bids will bring more business in. It won't. When things are slow the only way to bring sales in is the old-fashioned way: talking directly to real customers or "dialing for dollars".

Right now Google wields too much power in cyber-space. It's practically a monopoly considering that it has 80% of mindshare. Do you really want your business fortunes totally reliant upon some behemoth with Google's reputation amongst small businesses?

Google controlling 80% of the search business is really bad news for the rest of us.

Comments

i'm sure all the people who live in atherton are SO happy that google employees have driven the price of housing up so high that kids who grew up in that town can't afford to live there anymore.

after all, as long as someone is willing to pay the money, it's all good, right?

i guess it's a good thing if you want google to be the only employer left in silicon valley.

don't worry- their monopoly on text ads is quickly drawing to a close. and here's a hint- they have never figured out how to make a DIME from any of their other "beta" products. it's all based on those text ads. every penny.

"Skype has a potential advertising revenue stream with Skype In and Out. This is attractive to Google as their revenue is very ad-based. In the future, Google needs to have new revenue streams to justify its stock price. Skype In and Out present a new revenue stream for them.

At the same time, Google would just love to intermingle Skype and AdSense. It would be great. Every time you click on an ad you get a free minute of long distance. Sounds like a good idea for the home user who wants to talk to his family in India. I can only imagine the number of clicks happening. Ads change as you IM your friends and start talking about the latest movie star gossip. This is completely in line with Google's context sensitive advertising."

AdSense click fraud is so into the minds of the people, that this genius considers it legal. Ohh, my :